Health Care Fraud Defense: Arrests Based Upon Medicare, Medicaid, or TriCare Insurance Claims

Defending Against Allegations of Fraudulent Billing to Federal Benefit Programs

Health care providers in the State of Texas seeking reimbursement or payment for services rendered to persons in their care or charge must understand they are vulnerable to investigation and prosecution by either federal or state law enforcement for health care fraud crimes.  Suspicion can arise in either of these two jurisdictions.

The Office of the Attorney General of the United States and the Office of the Attorney General of Texas are independent prosecutorial agencies dedicated to enforcing federal and state criminal laws, respectively.  They are entirely separate in their duties and powers.  Both focus a tremendous effort in pursuing those who are believed to have committed health care fraud.

What is Health Care Fraud?

The Texas Attorney General’s Office defines “health card fraud” as “deliberate deception or misrepresentation of services that results in an unauthorized reimbursement.”

A federal definition of “health care fraud” is found in 18 U.S. Code § 1347, which defines it as:

(a)Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—

(1) to defraud any health care benefit program; or

(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.

(b) With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section.

Health Care Fraud: Private Insurance Policies

This defining federal statute, 18 U.S. Code § 1347, is the federal law which makes it a crime to defraud or make false representations in connection with billing for medical services to insurance companies on behalf of the insurance policy subscribers.  It focuses on private insurance provided by commercial insurance companies for a premium.

For more on health care fraud involving this law and private insurance policies, read our earlier discussion for details:  “Federal Crimes and Sentencing Guidelines: Health Care Fraud.”

Health Care Fraud: Government Benefit Programs

In Texas, a huge amount of health care insurance billings are submitted each year independent of commercial carriers.  Medical benefit programs established by the government provide coverage for health care separately from any private insurance company.

According to benefits.gov, there are 107 different government medical benefit programs currently offered in Texas.   While any deceptive collection of their reimbursements can form the basis of a health care fraud prosecution, most Texas health care fraud prosecutions focus upon allegations of a provider defrauding Medicare, Medicaid, and/or TriCare.

• Medicare is the federal health insurance program for: (1) people who are 65 or older; (2) certain younger people with disabilities; and (3) people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant).
• Medicaid defines itself as the federal health insurance program for low-income adults, children, pregnant women, elderly adults, and people with disabilities who meet its eligibility requirements. Medicaid is administered by each state pursuant to federal requirements. It is funded jointly by the state government and the federal government.
• TriCare defines itself as the federal health insurance program for uniformed service members, retirees, and their families around the world, providing comprehensive coverage to all beneficiaries, including: (1) health plans; (2) special programs; (3) prescriptions; and (4) dental plans.

Defrauding the Government: Health Care Fraud Allegations

Health care fraud prosecutions are likely to be based upon a series of federal criminal statutes, each of them dealing with fraudulent conduct in some way.

1.  18 U.S. Code § 287:  General Fraud Statute

According to 18 U.S. Code § 287, any action which defrauds the federal government is a crime.  It states that:  “[w]hoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title.”

This is the general federal fraud law.  It is rarely used in health care fraud prosecutions.  When prosecutors pursue allegations of health care fraud involving federal health care programs like Medicare, Medicaid, or TriCare, they usually base their case upon the more specific health care fraud statute,  42 U.S. Code § 1320a–7b.

2.  42 U.S. Code § 1320a–7b: Health Care Fraud Statute

Federal statute  42 U.S. Code §1320a–7b makes it illegal to defraud any of the federal health care programs.  By definition, the scope of this federal statute applies not only to any plan or program that provides health benefits funded directly, in whole or in part, by the federal government, but also to any state health care program as defined in 42 U.S. Code §1320a–7(h).

The federal health care fraud law (42 U.S. Code §1320a-7b) has two parts to it:

• The first part, 42 U.S. Code § 1320a–7b(a), deals with defrauding the federal health care program.  These cases are going to be services-not-rendered cases or fraudulent coding or other fraudulent schemes to defraud.

• The second part, 42 U.S. Code § 1320a–7b(b), is the anti-kickback provision of the law. This prohibits referral fees, leasing arrangements, or other “remunerations” that involve providing health care in exchange for referring a patient who will receive services and payments made under the federal health care program.

3.  Other Federal Fraud Statutes

Of course, prosecutors will seek to strengthen their case with as many criminal statutory violations as they can muster.  Charge stacking is commonplace in federal criminal matters.  As for health care fraud prosecutions involving Medicare, Medicaid, and/or TriCare, health care fraud defense attorneys can expect to see the following statutes in the allegations as well (among others):

1. 18 U.S. Code § 1001

This statute defines a federal crime as 1) knowingly and willfully; 2) making any materially false, fictitious, or fraudulent statement or representation; 3) in any matter within the jurisdiction of the executive, legislative, or judicial branch of the United States.

Essentially, it is illegal pursuant to this federal law to make any kind of false statement whatsoever to the government, even if that statement is simply a denial of guilt.  Merely saying “I’m innocent” is a statement that can be used against the accused as a basis for charging them with violation of this law.

• For more on talking with investigators, read my earlier discussion and watch my video in “Don’t Ever Talk to the Police! Never Give A Statement To Law Enforcement In Texas Criminal Investigation.”

2. 18 U.S. Code § 1035

This law deals with making false statements to federal law enforcement agents that are material in connection with their investigation.  In health care fraud matters, the government investigator (FBI agent, for instance) will seek to interview the employees in the health care provider’s office as well as the owner of the healthcare business about certain billing practices.

Criminal defense attorneys understand that at this stage of the investigation, it is vital that no one voluntarily gives a statement to the investigator or to anyone from the U.S. Attorney’s office.  All employees – from receptionists to owners – must understand their risk here.

Why?  If they do volunteer information to the agent or investigator, and the prosecutor believes those statements to be both (1) material and (2) false, they will likely be charged with violation of this statute.

Prosecution Example under 18 US Code § 1035

Consider an ambulance fraud case out of Pennsylvania.  In U.S. v. Advantage Medical Transport, Inc., adv. United States of America, No. 17-3132 (3d Cir. Sept. 12, 2018), the federal appellate court affirmed the district court’s determination that the charging documents adequately listed the elements of a violation under 18 US Code § 1035, affirming the indictment and ultimate conviction.

In the charging documents, both the ambulance company (Advantage) and its sole owner were alleged to have made materially false statements in violation of 18 US Code § 1035 by fraudulently altering “trip sheets” in order to deceive Medicare into issuing reimbursements.   The trip sheets were forms that provided details for each ambulance transport.

As described in the Indictment, the owner and his company perpetrated a scheme to defraud Medicare in violation of 18 US Code § 1035 by submitting hundreds of reimbursement claims for transporting Medicare beneficiaries to and from kidney dialysis treatment centers. The requests for Medicare payments were alleged to be fraudulent because the transports were not medically necessary:  the Medicare beneficiaries were ambulatory.

As demonstrated by the trip sheets attached to the Indictment, the owner allegedly did not submit the original forms to Medicare.   Instead, he re-wrote (or ordered EMTs to edit) their descriptions to cover up that the patients were able to walk and did not need to be transported by ambulance for their dialysis treatments.

The alteration of the trip sheets by both the owner and his employees resulted in the owner being sentenced to 24 months in prison for violation of 18 U.S. Code § 1035 and ordered to pay $494,378 in restitution and fines, with the company ordered to pay $194,378 restitution to Medicare (jointly and severally with the owner) and to pay an additional $250,000 fine.

Federal Notice to Doctors: Ignorance Is Not a Defense

Health care professionals are presumed to know they face federal imprisonment as well as serious monetary fines and significant restitution orders should they violate the federal health care fraud laws.

Doctors in Texas cannot avoid prosecution by denying knowledge of these statutes.  They are on public notice about these laws.  It is no defense that a physician or member of his or her office staff is unaware of a federal fraud statute or how deceptive health care fraud acts are defined by law.

Prosecutors can simply point to a computer screen. The Office of the Inspector General has a website established specifically to notify doctors and other health care professionals about their obligations under the health care fraud laws.  Not only are things like Fraud and Abuse Laws explained by the O.I.G., but the site also offers special fraud alerts with bulletins delving into subjects like Laboratory Payments to Referring Physicians and Physician-Owned Entities.

Range of Punishment upon Conviction of Medicare, Medicaid, TriCare Fraud

Alongside the language of the specific health care fraud statutes, the Federal Sentencing Guidelines will control the punishment that a defendant faces upon conviction for health care fraud involving Medicare, Medicaid, or TriCare in federal court.  The United States Sentencing Guidelines (USSG) will be calculated if the defendant is found guilty under 2B1.1.

For details in how federal sentences are calculated under the USSG, please review our detailed discussions, which include examples using the Sentencing Tables, in:

• Federal Crimes And Sentencing Guidelines: Health Care Fraud;
• Relevant Conduct in the Federal Sentencing Guidelines: Acquittals And Uncharged Conduct;
• Federal Sentencing Guidelines: Conspiracy to Distribute Controlled Substance Cases; and
• Federal Sentencing Guidelines on Federal Child Pornography Cases.

These guidelines provide a range of punishments to be applied by the judge as calculated using the Sentencing Manual.  The judge may have the power to make his or her sentencing decision outside the guideline recommendations.

• From a defense standpoint, it is critical to address the specific case circumstances in any sentencing hearing with the judge, because of the possibility of judicial discretion moving the sentence outside of the Guidelines. It can be done.  As an example, read: “Probation in a Federal Child Porn Case: Case Study by Defense Attorney Michael Lowe.”

Defense in Sentencing after a Health Care Fraud Conviction

The contributions that an experienced Health Care Fraud Defense Attorney can provide at any Sentencing Hearing after a conviction for Medicare, Medicaid, or TriCare Fraud cannot be underestimated.  Not only can arguments be made that the AUSA has made errors in USSG calculations, but the defense attorney will be able to address the factual bases for the sentence.

The most important issue at sentencing in these Medicare, Medicaid, or TriCare Fraud cases will be the amount of “intended loss” and whether any “offset credits” can apply to the total restitution ordered against the Defendant.

The biggest issue with intended loss in these cases has to do with (1) the amount billed as compared to (2) the contracted rate or (3) the amount expected to receive.  The government will always want to use amount billed because that will always be the highest number, yielding the highest possible sentence.  However, contract rates (the amount expected to receive) are usually much lower than the amount billed.

In these cases, it is critical that the Health Care Fraud Defense Lawyer know how to present expert testimony concerning billing practices.  (This testimony can be useful during trial or at sentencing.)

Case Precedent: Defending on Amount of Loss as Factor in Sentencing

An example of how this loss amount controversy frequently comes up in this Health Care Fraud Defense argument is found in US v. Ainabe, 938 F.3d 685 (5th Cir. 2019).  Mercy Ainabe was convicted of health care fraud regarding recruiting and transporting individuals to Texas Tender Care (TTC) for treatment.  Her actions with TTC and her similar actions involving two other companies (Gulf EMS, LLC (Gulf) and Gifter Medical Services (Gifter)) were considered by the judge insofar as the amounts billed by all three of these companies in calculating the “loss” for sentencing purposes.

On appeal, it was held that the judge’s factual determination that Ms. Ainabe expected each company to be paid the full amount that it billed was plausible, given that the USSG impose a presumption that Ms. Ainabe intended for each company to be paid the full amount that it billed.

Key here: the defense has the burden of rebutting the USSG presumption.

In her defense, Ms. Ainabe did provide some evidence that she did not expect each company to receive the full amount billed, including evidence that Gulf only received about 25% of what it billed.  However, even after considering that evidence, the Fifth Circuit found it plausible for the judge to find that Ms. Ainabe intended for each company to receive the full amount billed.

In comparison, the appellate court looked to United States v. Isiwele, 635 F.3d 196, 203 (5th Cir. 2011).  In Isiwele, there was evidence that the defendant knew Medicare paid on a fixed fee schedule for the services he provided but that he submitted claims for higher amounts “[knowing] he would receive these lower capped amounts.”  This resulted in the case being returned to the district court for reconsideration of the sentence.  Why?  The judge was required to consider whether that evidence rebutted the USSG presumption that the amount billed equaled the intended loss.

As explained by the Fifth Circuit in Isiwele (quoting United States v. Miller, 316 F.3d 495, 504 (4th Cir. 2003)):

“[T]he amount fraudulently billed to Medicare/Medicaid is `prima facie evidence of the amount of loss [the defendant] intended to cause,’ but `the amount billed does not constitute conclusive evidence of intended loss; the parties may introduce additional evidence to suggest that the amount billed either exaggerates or understates the billing party’s intent.”

The defense presented by Ms. Ainabe had no evidence explaining why Gulf received less than it billed, nor any evidence suggesting that TTC, a different company in a different industry, would receive less than it billed, for the same reason.  Unlike Mr. Isiwele, Ms. Ainabe failed to overcome the Guidelines’ presumption that she intended for each company to be paid the full amount billed.

Defense in Medicare, Medicaid, and TriCare Health Care Fraud Prosecutions

Prosecutors across the country, not just Texas, are aggressive in the investigation and prosecution of health care fraud cases.  For instance, just last week there was the indictment out of Mississippi of three defendants accused of health care fraud involving private insurance companies as well as Medicare and TriCare.  See, e.g., “Three Charged In $180 Million Health-Care Fraud Scheme,” written by WDAM Staff and published by WDAM-TV on June 12, 2020.

For doctors and other health care providers in Texas, it is often a shock to discover that they have become the focus of a state or federal investigation into fraudulent conduct, especially involving Medicare, Medicaid, or TriCare.  Oftentimes, these professionals have never had any dealings with the law, much less facing felony arrest and the possibility of imprisonment and fines based upon federal sentencing guidelines.

Having a Texas criminal defense lawyer with experience in Health Care Fraud Defense involving federal benefit programs (Medicare, Medicaid, or TriCare) is extremely important for any physician or provider under investigation for violating the health care fraud laws.   There cannot be an early enough time to begin a strong defense against fraud charges in these cases.

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth article, “Fraud Charges: Texas Criminal Defense Overview.”